UAW Strike: 'Far reaching negative consequences'

The United Auto Workers strike against the Detroit Three – Ford, GM, and Stellantis – is continuing to hurt U.S. consumers and businesses. 

On Friday, Sept. 29, UAW President Sean Fain announced 7,000 additional workers will walk out from Ford and GM facilities, expanding the strike to 25,000 of the UAW’s nearly 150,000 members at the Big Three.

Impact to consumers and workers:

• An expanded strike will reduce the number of new cars on dealership lots and make it harder to get your car repaired due to lack of parts being made. (NYT)
• If the car dealerships are unable to sell or repair cars, it could lead to further layoffs of employees.
• A Wixom, Mich.-based automotive supplier, Eagle Industries, Inc., is preparing to potentially lay off 75% of its workers, saying "It 100% is related to the strike." (Detroit Free Press)
• CIE Newcor, an auto components maker, announced plans to lay off 300 employees at four Michigan plants starting Oct. 2. “A temporary closing is possible, but will be determined by the length of the potential UAW – Detroit 3 strike.” (NYT and Regulatory filing)
• If smaller suppliers go more than a few weeks without selling products to customers, some may have to seek bankruptcy protection. (NYT)

'Far reaching negative consequences'

U.S. Chamber President and CEO Suzanne P. Clark issued a statement calling for an immediate resolution to avoid substantial economic impact.

“The decision by the United Auto Workers to initiate a strike will have far reaching negative consequences for our economy, for the American workers directly employed by the Detroit Three, their suppliers and dealers, as well as the thousands of small businesses and families whose livelihoods will also be put at risk.

“The UAW strike and indeed the ‘summer of strikes’ is the natural result of the Biden administration’s ‘whole of government’ approach to promoting unionization at all costs. For the 94% of American private sector workers not in a union, the costs are starting to stack up – from increasing consumer costs – now for new cars – to sudden loss in business for those in related industries like auto suppliers, restaurants and caterers whose customers are now on strike.

“As we have seen in new and proposed rules, it is no wonder unions feel emboldened when they see the Biden administration declaring that unions don’t actually have to win an election to be recognized, that those in management should be muzzled if they oppose unionization, and that preference for government grants and tax credits will go to shops that are unionized.

“The Chamber urges the UAW to call off the strike and get back to the negotiating table. We will continue to stand up for American job creators and their millions of non-unionized workers and against the administration’s overly aggressive pro-union agenda.”

The background: What to know

On August 25, the United Auto Workers announced that an overwhelming majority of its voting members had voted to permit a strike should the union’s leadership fail to reach a deal on a new labor contract with the “Detroit Three” when the current contract expires September 14.

On September 13, the U.S. Chamber led a coalition letter with over 160 groups, including State and local chambers and national trade associations, to President Biden urging the administration to provide the support necessary to help the UAW and Detroit Three reach a new labor agreement before the deadline and avoid the significant hardships on American families and the economy that would be imposed should a strike happen.

The UAW-Detroit Three negotiation is the latest labor dispute gripping the nation, following the recently completed UPS and Teamsters contract negotiations, the Biden administration’s mediation in the ILWU and West Coast port negotiations, and the last-minute intervention by the federal government to stop a rail strike in December 2022. Cumulatively, these disputes impose significant challenges on a business community already grappling with growing geopolitical challenges, labor shortages, and ongoing supply chain disruptions that began during COVID.

Much is at stake in these negotiations. More than just the future pay and working conditions of the 150,000 UAW members, in many ways, this negotiation will determine the future of the auto industry. The growth of the electric vehicle (EV) market, the thousands of small U.S. businesses that supply the Detroit Three’s factories, and our nation’s continued competitiveness on the global stage, depend on this negotiation ending with a deal – and no strike.

A contract fight like no other

A strike could result in a total economic loss of more than $5 billion over 10 days, according to some estimates.

Ultimately, the crux of these negotiations is over the future of the auto industry. The automobile industry is increasingly focused on making electric vehicles – which accounted for 59% of all net new jobs in motor vehicles, according to the Department of Energy. The Detroit Three – like other automakers – are making enormous investments to manufacture EVs and their components here in the United States to support their larger EV ambitions. These larger developments will impact the workforce, making it an important part of the negotiations.  

In addition to their investments in innovation, the Detroit Three prioritize investing in their workforce, paying industry leading wages ($65 - $70 per hour, including profit sharing, bonuses, higher health benefits, and other benefits) compared to the average U.S. non-union automaker ($45-$55 per hour).

Small businesses rely on the Detroit Three

The Detroit Three is estimated to have produced 4.8 million vehicles in the U.S. in 2022. A 2020 report shows that the Detroit Three are supported by 238,000 employees at 260 assembly plants, manufacturing facilities, research labs, distribution centers, and other facilities across 31 states. They also work with nearly 9,700 dealerships, which employ nearly 660,000 U.S. workers.

Additionally, every vehicle that rolls off the assembly line of a Detroit Three automaker contains anywhere from 8,000 to 12,000 different components manufactured by over 5,600 U.S. suppliers. Over 690,000 supplier jobs are estimated to be tied to the Detroit Three, which accounts for anywhere from 20% to 70% of their business. This makes any strike extremely damaging to their businesses and employees.

While the UAW has a fund that can partially support its members during a strike, the employees of these smaller companies would not be protected. During the 2019 UAW strike on General Motors, suppliers had to temporarily lay off approximately 75,000 workers. When strikes happen, they are even more costly for workers at suppliers.

International automakers increasing competition against the Detroit Three

The auto industry is increasingly seeing new competition from new players despite a shrinking market with over 70 new EVs expected to be introduced between now and 2027. The Detroit Three are seeing European automakers including Volvo and Polestar offer new EV models, as well as offerings from Chinese automakers Nio and BYD. The Detroit Three’s ability to stay competitive in this changing market will come down to the final labor deal with the UAW and how it compares with other automakers’ compensation deals.

The Detroit Three Are Investing Heavily in the EV Transition

The EV transition is expensive, and we need to ensure that American auto manufacturers continue to lead the world in this area. For example, the average cost of building a new EV plant is $4 billion per year. The Detroit Three are increasing their annual capital expenditures from an average of $16 billion several years ago to $25 billion in 2022, according to company filings. This investment is helping build new battery and manufacturing plants, invest in domestic supply chain, and fund research and development, all of which will ultimately create jobs and opportunities for American workers.

Bottom Line

To protect American workers and consumers, sustain economic growth, and keep our competitive edge, Americans are relying on the Detroit Three and UAW to come to a mutual labor agreement and avoid a strike. A strike would inflict devastating damage on the economy and American workers.

About the authors

John Drake

John Drake is responsible for representing the business community on transportation, infrastructure, and supply chain issues before Congress, the administration, the media, the business community, and other stakeholders.

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